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With offshore yuan hitting a record high to the US dollar at 6.7980 last week, we turn to its mainland cousin to study very long-term trends. What is especially interesting is that the latest rally took place on dwindling volume and subdued bullish momentum, while historical volatility is exactly at its long-term mean; in other words, depreciation since July has not taken investors by surprise. Despite being overbought we expect more rallies towards major long-term resistance between 6.8175 and 6.8900 late this year. However, the pace of rallies is likely to slow with potentially much hesitation around 6.8300. Price action since June 2010 can be seen as a symmetrical bowl-shaped secular base.

Nicole Elliott is a technical analyst

This article appeared in the South China Morning Post print edition as: